THE BUZZ
Yesterday, Censof announced that it has entered into a Sale and Purchase Agreement to acquire an 80% stake in Knowledgecom SB for RM4m from Zaghlul Merican bin Sultan Merican, Mohd Noor Zaimi Bin Zainol and Rubaneswaran A/L Thevasenabathy.
The company is involved in the provision of IT business solution services, corporate IT training and management courses.
OUR TAKE
No surprise. The move did not come as a surprise as management had indicated earlier that it was eyeing expansion via M&As to take Censof to its next leg of growth. We expect to this acquisition to give rise to synergistic benefits, especially in the downstream areas of IT e-training and management courses relating to its existing Financial Management Software Solutions (FMSS) business.
A bargain. We understand that the purchase consideration will be satisfied largely by internally generated funds. The acquisition is pegged to a 4x forward PE based on a profit guarantee of RM1m for FY12. We think this is a bargain given that the acquiree company is valued at a huge discount to Censof’s 12x FY12 PE. Nonetheless, this will give rise to goodwill of approximately RM3.5m since Knowledgecom’s net assets stood at only RM534k in FY11. The acquisition is targeted for completion by 10 Jan 2013.
Yesterday, Censof announced that it has entered into a Sale and Purchase Agreement to acquire an 80% stake in Knowledgecom SB for RM4m from Zaghlul Merican bin Sultan Merican, Mohd Noor Zaimi Bin Zainol and Rubaneswaran A/L Thevasenabathy.
The company is involved in the provision of IT business solution services, corporate IT training and management courses.
OUR TAKE
No surprise. The move did not come as a surprise as management had indicated earlier that it was eyeing expansion via M&As to take Censof to its next leg of growth. We expect to this acquisition to give rise to synergistic benefits, especially in the downstream areas of IT e-training and management courses relating to its existing Financial Management Software Solutions (FMSS) business.
A bargain. We understand that the purchase consideration will be satisfied largely by internally generated funds. The acquisition is pegged to a 4x forward PE based on a profit guarantee of RM1m for FY12. We think this is a bargain given that the acquiree company is valued at a huge discount to Censof’s 12x FY12 PE. Nonetheless, this will give rise to goodwill of approximately RM3.5m since Knowledgecom’s net assets stood at only RM534k in FY11. The acquisition is targeted for completion by 10 Jan 2013.
Upgrade to NEUTRAL, lifting FV to RM0.34. We are nudging upward our FY13 earnings forecast by 16.8% to factor in the potential contribution by Knowledgecom SB. This leads us to a higher FV of RM0.34, based on unchanged 9x FY13 PE (previously RM0.29). Following the upgrade, our FV for Censof is now close to current stock price (albeit a little lower). Hence, we are upgrading our recommendation from SELL to NEUTRAL.
Source: OSK
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